Fiscal redistribution cycles: four decades of social assistance in the UK

David Coady

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper describes the evolution of fiscal redistribution (FR) in the UK through social assistance transfers over the last four decades and the contribution of each of its determinants: budget effort (the share of national income devoted to redistributive transfers) and transfer progressivity (the extent to which these transfers are concentrated on lower-income households). Trends in FR have been driven by a combination of economic and political cycles. Over the 1980s and 1990s, the heavy reliance on means-tested transfers indexed to prices resulted in FR fluctuating over the ‘economic cycle’. Over recent decades, FR has been driven primarily by ‘political cycles’. Under a Labour government (1997–2010), a large expansion of coverage of in-work benefits resulted in an unprecedented, sustained increase in effort which, despite decreasing progressivity, was large enough to ensure a continuous rise in FR. This increase was reversed under a Conservative-led government from 2010 in the context of fiscal austerity, which decreased effort and increased progressivity as remaining transfers were concentrated more on lower-income households. A striking feature over the last four decades has been the sharp decline in FR to the poorest income decile under different political leadership as emphasis has shifted to reducing in-work rather than out-of-work poverty and ‘making work pay’.

Keywords: poverty; redistribution; budget effort; social assistance; progressivity; inequality (search for similar items in EconPapers)
JEL-codes: D31 D63 H23 I38 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2025-06-30
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Published in Oxford Review of Economic Policy, 30, June, 2025, 41(1), pp. 120 - 139. ISSN: 0266-903X

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